Japan's manufacturing sector hasn't looked this good in years

Chris McGrath/Getty Images Japan's manufacturing sector enjoyed another strong month in February with activity levels improving at the fastest pace in nearly three years.

The Nikkei-IHS Markit "flash" manufacturing purchasing managers index (PMI) rose to 53.5 in February, above the 52.7 level of January and the highest level since March 2014.

The PMI measures changes in activity levels across Japan's manufacturing sector from one month to the next. A reading of 50 is deemed neutral, with anything above this figure indicating that activity levels have improved. The distance from 50 reflects the scale of the improvement reported.

The "flash" PMI reading is based off responses from around 85-90% of all firms surveyed, and is generally a pretty good guide as to how the final figure will print when it's released this time next week.

So at 53.5, activity levels not only improved in February, they did so at a faster pace than January.

via Business Insider Australia

This table from IHS Markit shows how individual components within the survey fared in February, and much like the headline reading, the internals were largely strong.

IHS Markit

Output, new orders, new export orders, stock purchases and employment all grew at a faster pace than they did in January.

As lead indicators, the strength in new orders — both at home and abroad — bodes well for activity levels in the months ahead.

An increase in order backlogs, along with a faster decline in inventory levels, also points to a strengthening in activity levels.

"Encouragingly, with backlogs of work accumulating for the first time in 14 months, the added pressures on capacity should ensure growth will be maintained at a solid pace during at least the first half of this year," said Samuel Agass, an economist at IHS Markit.

"Subsequently, business confidence was at a survey-high."

That's good news, and suggests the positive momentum in the global economy may have continued after a strong start to the year.

Markets will get further clarification on that front later today with manufacturing and services PMIs from the United States, Eurozone, Germany and France all arriving later in the session.